Editorial: The only option for pensions
EDITORIALS June 8, 2012 8:06AM
Chicago Teachers Union president Karen Lewis.
Updated: July 9, 2012 6:14AM
A conventional wisdom is beginning to take hold about passing real pension reform before the November elections:
Ain’t gonna happen.
For the sake of the health of fragile Illinois — and the pensions that public-sector workers hope to rely on one day — that so-called wisdom cannot stand.
Legislators have no choice but to dramatically reduce pension costs this summer.
At last count, the state’s unfunded pension liability stood at $83 billion, forcing the state last month, once again, to slash spending on core state services to pay its pension bill, cutting education, social services and health care for the poor.
Each day that passes without a fundamental reform is also a day closer to insolvency for the pension systems. The director of the Teachers’ Retirement System, which oversees pensions for all teachers outside Chicago, earlier this year began saying the awful truth out loud: Without any change, insolvency looms as early as 2030.
And most immediately, the state’s paralysis raises the risk of a credit downgrade, a move that would increase the state’s borrowing costs. Already, Illinois has the worst credit rating among all states and Standard & Poor’s has threatened to lower its rating “by more than one notch” if the state doesn’t address its pension liabilities and make progress on its budget. On Wednesday, Standard & Poor’s chastised the state’s failure to move on pensions.
Add these up and it’s clear that real reform, today, is the only option. The Illinois Senate late last week passed a pension reform bill, but it covered only two of the five state pension systems, excluding the biggies: for teachers and university employees. Though tempting, the House shouldn’t take the bait. Anything short of full reform takes the pressure off legislators.
The main sticking point preventing a deal remains the push by Democrats — which we support — to shift some pension costs from the state to school districts to make them more accountable for the benefits they effectively dole out.
Republicans are opposed, saying it will force districts to raise property taxes, an argument we don’t think holds up under scrutiny.
Over the next two weeks, the governor’s office promises to release data on how this would affect school districts, hopefully clearing up the misconception that this core element of pension reform isn’t doable.